EasyJet profits nosedive 70% after £105m Iran war fuel cost hit

Just weeks after agreeing a £5.7 billion takeover, easyJet has revealed a 70 per cent slump in profits due to rising fuel costs and lower bookings, said to be caused by the Iran war.

The budget airline said the overall outcome for the full year “remains dependent on the important remaining bookings, as well as fuel prices, which continue to be volatile”.

Susannah Streeter, chief investment strategist at Wealth Club, said: “EasyJet has flown through some fierce turbulence with profits taking a nosedive, but shares are cruising higher today as investors spy resilience, amid the ongoing takeover story. Third-quarter profits plunged 70 per cent to £85 million as the Middle East conflict sent fuel costs soaring and knocked travellers’ confidence, but demand didn’t disappear, it simply arrived later, with holidaymakers waiting until closer to departure to book, lured by attractive fares.

“Investors also seem to be encouraged by the continued momentum in easyJet Holidays, which is proving to be much more than a useful sidekick to the airline. Customer numbers grew eight per cent and profits rose seven per cent on a constant currency basis. It’s increasingly becoming the group’s profit engine, delivering higher-margin revenues at a time when the core flying business is battling volatile fuel costs and geopolitical disruption. As more travellers opt for package holidays, easyJet is earning a bigger slice of customers’ travel budgets, helping smooth some of the bumps that have traditionally made airline earnings so unpredictable. And the company has big ambitions for this part of the business, targeting  £590 million in pre-tax profit by 2030.

“Above all of this looms the bid for the airline by private equity giant Apollo, and investors may be buying into the possibility that there could be another chapter to the takeover story. Apollo’s interest has highlighted the airline’s strategic value, and although tougher EU scrutiny over foreign ownership clouds the path to a deal, investors don’t appear to be ruling out another twist, and potentially another approach from rival bidder Castlelake. Until there’s greater clarity on whether Apollo can navigate the regulatory turbulence, or whether another bid could emerge, takeover speculation and the prospect of further corporate interest also appear to be providing shares with a fresh tailwind.”